Stop calling it the “Sharing Economy.” That isn’t what it is.

It’s known under a number of names: The Sharing Economy. The Collaborative Economy. The Gig Economy. Because of its “fresh” and “disruptive” model, undeniable financial incentives in the middle of a global economic recession, and its integral connection to the tech startup community, this new business movement has been garnering a whole lot of attention in the last few years. If, like me, you spend quite a bit of time interfacing with tech companies and digital business professionals, you can actually feel the peer pressure pushing you to support companies like Uber, Lyft and AirBnb. If you don’t, your peers are likely to look at you a little sideways, cock an eyebrow, and find a roundabout way of asking you what’s wrong with you. If I look at this with suspicion, I’m old school. I’m stuck on old paradigms. I need to get with the times, right?

“It’s evolution, man. Business Darwinism happening right before our eyes!”

Well… no. I’m not exactly a conservative when it comes to tech or business, or pretty much anything. I’m cautious, sure, I tend not to be an early adopter (first generation tech is too buggy for the price, thank you very much), but I’m not a progress-averse curmudgeon. Far from it. I just like to understand stuff before I buy into it. That’s how I avoid falling for scams and bullshit (at least most of the time). I used to work in sales. I’ll just leave it at that.

“Disruption rocks though!”

No, it doesn’t. The right kind of disruption rocks. The kind that has value, that solves a problem, that improves an imperfect system. But disruption for the sake of disruption is just noise. It can even be destructive, and that doesn’t rock. It doesn’t rock at all.

Because Apple was “disruptive,” anything deemed disruptive now somehow borrows from Apple’s cachet. “Disruption” has become another meaningless buzzword appropriated by overzealous cheerleaders of the entrepreneurial clique they aspire to someday belong to. And look… every once in a while, someone does come up with a really cool and radical game-changing idea: Vaccines, the motorcar, radio, television, HBO, the internet, laptops, smart phones, Netflix, carbon fiber bicycles, drought-resistant corn, overpriced laptops that don’t burn your thighs in crowded coffee shops… Most of the time though, “disruption” isn’t that. It’s a mirage. It’s a case of The Emperor’s New Clothes, episode twenty-seven thousand, and the same army of early first-adopter fanboys that also claimed that Google Plus and Quora and Jelly were going to revolutionize everything have now jumped on the next desperate bandwagon. What will it be next week? Your guess is as good as mine.

I don’t know much about the hidden mechanisms of addiction, but I can’t help but notice a pattern with a certain crowd. There’s a compulsion there to jump on every new fad and build it up as something it clearly isn’t, right down to its unfortunate nomenclature. That’s probably why it isn’t unusual to hear fans of the “shared economy” talk about how this model is a new form of capitalism, how it’s going to change the world for the better. “Cab drivers refuse to evolve, man. They have only themselves to blame if they can’t compete. This is the future!”

Again, no. That’s not what’s happening. Could taxi companies stand to get better at using tech (like they do in Bogotá, Colombia)? Sure. But you aren’t talking about helping them do that, are you. You aren’t lauding a company that set out to bring cab companies into the 21st century. What you’re doing is lionizing the ticket-scalpers of the hired car industry just because they use a popular app. When you do that, you aren’t praying to the altar of progress or even tech Darwinism. You’re praying to the altar of “disruption.” It doesn’t matter how chaotic or damaging it may be as long as it’s disruptive. You’ve just jumped on the latest tech bandwagon without bothering to look at the big picture. Again. Which is to say that you’ve fallen for the latest hype bubble, the latest bit of messaging, the latest round of investment-driving marketing. You’re just parroting PR copy without questioning its validity in the real world.

And you know what else? (And this is actually more important.) That isn’t the future you’re looking at. It’s just an app-assisted reboot of the past. I’ll get to that in a sec. First though, this:

Piracy by any other name is still piracy.

If you really believe that a “ride-sharing” or room-booking service that deliberately attempts to avoid a country, state or city’s laws regarding licensing, insurance, fees and rate limits is somehow “competing” with legitimate taxis, hired cars and hotels, you’ve probably also rationalized that scoring your music and TV shows for free from pirating websites is somehow an example of legitimate market competition too. Well, it isn’t. Two sets of rules for “competitors” usually doesn’t end in fair competition – not in sports, and certainly not in business. Tip: There’s a reason Lance Armstrong was stripped of his 7 Tour de France victories, and it wasn’t because his training model was “disruptive” or “innovative.”

If, like me, you really want to see who comes out on top of a fair market competition between an Uber and an incumbent taxi company, then you have to level the playing field: “Ride sharing” services need to pay the same fees as the cabbies. They have to apply for the same licenses and permits. They have to submit to the same requirements in regards to driver qualifications, vehicle inspections, insurance coverage. They have to pay the same fees. If and when they start to do that, you’ll have a level playing field, and may the best business model win. Until that happens, good luck convincing authorities and the public that they aren’t running illegal taxi services and engaging in fare piracy.

Harsh words, I know, but that’s reality. Deal with it. And if you don’t believe me, go have a chat with a professional cab driver in NYC or Brussels or Paris or London. They’ve invested in their business. They’ve played by the rules and obeyed laws which are there to protect them AND consumers. Laws that took decades to come up with by the community in which they apply, whose intent was to established the most ideal balance possible between cab fares and consumer protections. Shattering all that work isn’t the kind of “disruption” anyone who understands the checks and balances of that market actually wants. What’s the impact on urban planning? What’s the impact on traffic congestion? What’s the impact on people’s quality of life? All of these things matter, and more so now than a generation ago. Per Frank Pasquale (University of Maryland School of Law) and Siva Vaidhyanathan (University of Virginia):

As allegedly “innovative” firms increasingly influence our economy and culture, they must be held accountable for the power they exercise. Otherwise, corporate nullification will further entrench a two-tier system of justice, where individuals and small firms abide by one set of laws, and mega-firms create their own regime of privilege for themselves and power over others.

“Nullification” is a wilful flouting of regulation, based on some nebulous idea of a higher good only scofflaws can deliver. It can be an invitation to escalate a conflict, of course, as Arkansas governor Orville Faubus did in 1957 when he refused to desegregate public schools and president Eisenhower sent federal troops to enforce the law. But when companies such as Uber, Airbnb, and Google engage in a nullification effort, it’s a libertarian-inspired attempt to establish their services as popular well before regulators can get around to confronting them. Then, when officials push back, they can appeal to their consumer-following to push regulators to surrender.

Again, could cab companies stand to upgrade their tech? Absolutely. Does it mean that anyone with a car should be able to steal their fares by running a part-time, unbonded taxi service from behind the wheel of their Camry? No. And if you want to bring up the old line that “the old taxi model is corrupt,” don’t. If the new system aimed to end that corruption, you’d have a point. But it doesn’t. There’s no high road here. Replacing anecdotal incidences of corruption with a nullification scheme isn’t improvement. It’s the opposite. Bring ethics up again if and when ride sharing services ever manage to occupy that particular high road.

Before you brand me a hater or an enemy of startups, understand that I am the exact opposite: I love startups. I love new ideas. I want to see more of them. Any way we can improve on a model is something I can get behind. Cheating though, covering up unethical practices with crackerjack dogma, that’s something entirely different. And success obtained via illegitimate means isn’t success at all. You think that “breaking the rules” makes you a rebel or a rock star? No. It makes you a cheater.

Tip: If you really want to be a rebel, make your idea so great that people will want to rewrite the rules. That’s the difference between a change agent and a cheater, and it’s time we started making that distinction.

I won’t say much more about the devastating economic impact that unlicensed cabs can exert on taxi drivers, and unlicensed hotels can exert on small independent hotel operators (it isn’t all about Hiltons and Marriotts). That isn’t the topic I really want to dig into today. We’ll circle back to the very real (and dangerous) socioeconomic consequences of shattering full-time gig models in favor of opportunistic part-time gig models, but for now, I want to bring this back to the term “Sharing Economy” real quick, and why it is such a misnomer.

Courtesy of Getty Images

For starters, renting isn’t the same as sharing.

Let me make something really clear: that whole “ride-sharing” thing? It isn’t ride-sharing at all. You aren’t sharing. You’re renting. You’re renting out the back seat of your car. You’re renting yourself as a driver. You’re renting your spare bedroom for the night. You’re renting your flat while you’re on vacation. There’s no sharing anywhere near the so-called “sharing economy.”

If you really want to see the sharing economy in action, check out timeshares. Check out farming co-ops. Check out hippie communes. Hell, join your local homeowner’s association (or rather… don’t). Even profit-sharing at your company is part of the sharing economy. There are tons of examples of legitimate “sharing” economic models out there if you actually look. Here’s how an actual “sharing economy” works: a group of people co-owns and shares property or certain resources, and they get to enjoy their use based on their ownership shares. Neighbors operating small farms might purchase a harvester together, for instance, and share both its maintenance costs and its use throughout the year. With a timeshare, a group of owners owns shares in a piece of property and they share both its use and its costs. That’s how sharing works.

Other examples of shared services we run into every day: 911/emergency responders, public transportation, public schools, public parks, and so on. That fire truck screaming down your street to go put out a fire a couple of blocks away, you’re sharing that with the rest of the community. You all pay for it. Your resources are pooled together to provide this service for everyone. Because government is the operator in these instances, this is a more socialist model than the entirely capitalist timeshare, but the principle is the same: sharing is sharing. Anything that isn’t sharing isn’t… well, sharing.

So if one of those farmers we mentioned earlier decides to rent the co-op’s tractor through some tractor-sharing app (let’s call it Tractr), or decided to turn his farm into a boarding house for itinerant drifters heading West in search of actual jobs (good luck with that), that would be renting, not sharing. The moment you start renting something, you move into the “Rental Economy.” It’s just… there’s nothing new or sexy about that, so what would be the point of even talking about it?

(Exactly.)

You think this is revolutionary? No. It’s just another sales pitch.

What about the Collaborative Economy?

My friend and colleague Jeremiah Owyang has dubbed this movement the “Collaborative Economy,” and I applaud the effort, but… I have to respectfully disagree with the use of that terminology when it encompasses rental models. There’s nothing more “collaborative” about charging someone to sleep on your couch than there is about charging someone to book a room at one of your hotel properties. No one is actually collaborating. Buyers and sellers are just using an app to transact. That’s all. The only thing that’s new here is that the marketplace has shifted from the web to an app.

(Airbnb and Uber might as well be offshoots of eBay when you really think about it.)

A true “collaborative economy” would be more applicable to crowdfunding services, for instance, or apps that connect individuals and organizations to one another based on their ability and willingness to actually collaborate on projects: “I’m looking for engineers to help me design a $5 water purification system for disaster zones” is a collaborative ask. That’s a legitimate “collaborative” model. And to be fair to Jeremiah, he does include these types of companies in his giant chart-o’ collaboration. That chart though… may be a little too inclusive. Case in point: “I need a car to pick me up at my hotel and take me to a club” is about as collaborative as “my yard looks like crap and I really need to find a cheap landscaper.” You’re talking about buying and selling services now, not collaboration.

Let me ask you this: if someone pushed out an escort-booking app (let’s call it Hookr), would that be “collaborative” too, or is it only collaborative when the transactions involve cars and apartments?

Context matters: Co-creation apps are collaborative. Co-curation is collaborative. Helping make higher education available for free on the web is collaborative. Wikipedia is collaborative. Crowdfunding and P2P loans are collaborative. But renting myself out as a part-time driver or a weekend boarding house manager without a business license or proper insurance isn’t collaborative. We can pretend that the collaborative economy “an economic model where technologies enable people to get what they need from each other—rather than from centralized institutions,” and that certainly can be the case, but most of what we’re actually talking about is a mobile marketplace for rentals and sales.

And that’s the crux of my objection: If collaborative economy discussions were about true collaboration apps, we would have something to talk about. But they aren’t. What leads those discussions? Uber, Lyft and Airbnb. When we hear about how big their footprint is, those numbers include Uber, Lyft and Airbnb. When we talk about the financial aspects of the market’s size, who comes up again? Uber, Lyft and Airbnb. Incorporating renting apps into the model skews the numbers. It skews the terminology. It’s a lot like trying to classify pizza as a vegetable: you can if you want. If you’re willing to twist yourself into a pretzel to make the logic work, more power to you. But you know it’s ridiculous.

Note: You should definitely check out Jeremiah’s work on this. (We only really disagree on two points.) Regardless of where you stand on the issue, his work is important and relevant. He is probably the best resource on this topic today, and his charts and graphics will help you become well-versed in this complex ecosystem.

One of the most helpful bits of content you are likely to find is his handy honeycomb graphic:

The Gig Economy:

Former Secretary of State Hillary Clinton recently used the term “gig economy” to describe this movement, and that’s actually not bad. It’s catchy. More to the point, it fits a certain piece of this: The piece that focuses on part-time employment (assuming we can call it “employment” at all). The piece that lets creatives hire themselves out by the hour or by the task, for instance. Fiverr and Task Rabbit fit into the gig economy, obviously. Even Craigslist fits in there somewhere. Nothing super sexy or high tech about that. And I think that’s the part that bothers me the most about the massive hard-on some people seem to have for the so-called “sharing economy.” In spite of all the noise, and even aside from the flagrant semantic misdirection, there’s nothing really all that new or original about any of it. The only thing that’s new is that it works via apps instead of yellow pages, flyers and ads. The tech is new(ish) but the model is essentially the same as it’s always been.

Here’s an exercise: Imagine a world where nobody has full time jobs anymore, where everyone is a contractor. For some of you, that will probably seem like some kind of entrepreneurial utopia, a libertarian dream. In theory, sure. It sounds kind of cool because “freedom”… but then you realize that it’s the kind of model that we did away with in the early parts of the 20th century, and for good reasons: A “gig economy” cannot produce or support a healthy middle class. It doesn’t factor-in realistic retirement planning or college savings. Because it eliminates income security, it all but eradicates upward mobility. What you end up with is a 1% class (more like a 5%) and a 99% (95%) class, which isn’t super healthy for any economy, as history shows us time and time again. Fully realized, that gig economy looks like this for the 99%: selling and renting everything they possibly can to make ends meet and save a little money here and there. For the 1%, it cuts most of the cost out of running a business, which is kind of the point.

Don’t worry, I’m not here to make a slippery slope argument. The world isn’t going to slide into a dystopian future where the starving homeless masses fight each other in bloody rickshaw wars over trivial absurdities like Yelp reviews. I’m only trying to make a point, and it’s this: we’ve been here before, and it wasn’t pretty. We don’t need or want to go back to that model. The “gig economy” isn’t something new or cool or ultimately beneficial to anyone except the handful of clever CEOs and their investors, who have managed to convince masses of “independent contractors” (not really) to go out and break up the very fabric of local economies so they can make a few bucks and feel like they’re part of some kind of biztech revolution. It’s a mirage. It’s a con. Speaking of which…

Here’s a tip: No matter what apps you use on your phone, you aren’t Steve Jobs. You aren’t Richard Branson. You aren’t a maverick. You aren’t part of something grand. You’re just moonlighting as an amateur cab driver or a handyman so you can maybe pay off your student debt before you’re 80 (or just buy a bigger flat screen TV for your ridiculously overpriced mousetrap of an apartment). So before you start telling me how awesome this “sharing economy” revolution is, and how important you are to it, take a step back and get some perspective.

That’s why terms like “the sharing economy” are so dangerous: they sound so benign, so positive… They make you think that you’re doing something good for yourself and the world, that you’re part of some great wheel of progress. You’re sharing after all, right? You’re collaborating? Well, no. What you’re really doing helping tech dudebros with no concept of the real damage they are about to cause undermine local economies (and your careers) just so they can take their companies public and buy their third yacht. That isn’t an indictment of capitalism, by the way. (I happen to like capitalism. And yachts.) It’s an indictment of tech con jobs (i.e. bubbles) and irresponsible economic behaviors. And what do you get out of it? A little extra cash on the side? Awesome. How about a side of higher taxes to go with that, when all the cabbies and small business owners in your town have closed up shop? How about a dessert platter of more crime, dirtier streets, and an uptick in substance abuse and suicide when all the full time jobs have been replaced by low-bidder independent contractor apps? You haven’t really lived until your municipality’s tax base tanks to the point where there isn’t enough money to pay teachers, cops and street sweepers, and your property loses half of its value inside of ten years. How about a little shot of ice cold no-retirement-for-you to wash it all down with? Bravo. Way to see the big picture. And guess what: the guys who built those apps, who sold you on the “sharing economy,” they aren’t living in your neighborhood, are they. They don’t have to “share” your experience or your shattered local economy. They’re hundreds of miles away, on the other side of an ivy-covered gate or a gorgeous marina, wondering how to squeeze more money out of you with their next prepaid startup du jour.

And look… I don’t want to make this about class warfare. I really don’t. I’m not going to be that guy. That’s why I don’t want to give too much credence to cynical terms like “theSerf Economy.” But it isn’t hard to see why they’re beginning to catch on. We’re all lining up to become drivers, maids, delivery boys, babysitters, lodgers of fortune… and for what?

More importantly, for whom?

As much as I dig the cool choices Airbnb gives me whenever I travel, the big picture doesn’t seem all that awesome to me. Something’s broken here, and it doesn’t take a genius to see it. So before we get too deep into this “revolution,” maybe it wouldn’t suck to give some thought to what it really is and where it is taking us. (That extra $50 in your pocket comes at a price.) Case in point, via Tech Crunch’s Jon Evans:

Let’s face it, “sharing economy” is mostly spin. It mostly consists of people who have excess disposable income hiring those who do not; it’s pretty rare to vacillate across that divide. Far more accurate to call it the “servant economy.”

So what’s the fix?

The fix is simple: Level playing fields. Fair markets with controls. That means regulation, oversight, rules. I know that doesn’t sit well with the “deregulate all the things” nullification crowd, but there’s a reason we have those kinds of protections. They protect small, privately owned companies from being smashed to bits by giant global conglomerates and fraudsters. They protect full-time workers from losing their jobs to cheap and/or disposable part-time labor. They protect water quality and air quality and food safety. Everything from speed limits in school zones to building permits is there to protect someone from getting hurt. Sometimes, those rules protect our physical safety, and sometimes they protect our combined economic safety. If better controls over bank practices had existed pre-2008, we wouldn’t be in a recession right now. If better controls over pollution and greenhouse gas emissions had existed for the last 50 years, we might not be dealing with drastic climate change right now either. Rules might seem sucky and unfair when you’re six years old, but for the most part, they’re what ultimately holds our civilization together. They’re the mortar. Let’s not forget that.

And if your argument against this hovers along the lines of “the world isn’t fair,” or “survival of the fittest,” or some other law-of-the-jungle-inspired bit of “toughen-up, buttercup” BS, (you know who you are), this is the part of this post in which I probably need to remind you that you aren’t actually living in a jungle. You’re living in civilized society, protected within its walls, which are paid for mostly by everyone you’re trying to dismiss as useless or disposable. Like it or not, you’re part of that community. And I get it: being a predator is super cool if you’re in the wild. I totally understand if your power animal is the cunning wolf or the mighty lion. But… look at you. You’re no wolf. You’re no lion either. On a good day, you’re barely a muskrat. You wouldn’t last the night in an actual jungle. So now might be a good time to stop being a delusional wrecking-ball of a sociopath, maybe, and start treating the community you live in like the fragile ecosystem it actually is. Be a leader: improve the system instead of wrecking it for your own benefit.

Okay. Back to terminology.

The Microtransaction Economy:

I’ll tell you what this really is, what it should really be called: the Microtransaction Economy.

I know. It isn’t sexy. You aren’t going to sell that to millions of people as something cool or exciting, but that’s all it is: microtransactions. A fare here, a fare there, $5 for a logo, $7 to deliver a pizza, $10 to wash someone’s car, $15 to babysit someone’s pug while they’re at the nail salon, $30 to let a stranger crash on your couch for the night, $50 to drive someone to the airport, and so on.

You aren’t sharing. You’re selling and renting little blocks of your life for a few bucks and giving your opt-in marketplace a cut of the action. No matter how well it adds up at the end of the month, it’s a means to parcel out your time and your resources so you can rent them in convenient little blocks. No business license required. Minimal fees. No permits. No inspections. Just you and some single-serving customers looking to do a quick bit of business through your phones. Like it or not, it’s no different from selling oranges out of the trunk of your car on the side of the freeway, or selling concert tickets in the parking lot. Just because you use an app to do it doesn’t make it any more modern or disruptive. It is what it is: a super efficient market that fits in your pocket.

It isn’t all that different from this adjacent microtransaction model, by the way, which gamers should be pretty familiar with by now. In this instance, you may not be transacting with a “peer,” but the principle is the same: you’ve opted into a convenient virtual marketplace that happens to live on your device. Whether the seller is a $10B company or some guy who lives three blocks away, what difference does it really make? A market is a market.

And don’t get me wrong: I don’t begrudge anyone the decision to make more money however they can, especially in this economy. You have to do what you have to do. But once you realize the extent to which these everyone-for-himself models end up undermining the very mechanisms that we should collectively be fighting to preserve and strengthen, it’s hard not to feel a little discouraged and cynical about how easily people can be manipulated into working against their own interests. It’s proof that the right kind of sales pitch and packaging can turn us into our own worst enemies, and I think that’s both scary and sad. In the end, the only we may end up actually sharing in this so-called “sharing economy” is the big ugly bag of consequences that we’re all collaborating to bring down on ourselves. Give that some thought.

Okay, that’s it. I’m done. Feel free to agree or disagree. The comment section is all yours. As always, try to keep things polite, but if you can’t, that’s okay.

Cheers,

Olivier

Additional reading:

Doug Henwood for The Nation – What the Sharing Economy Takes: Uber and Airbnb monetize the desperation of people in the post-crisis economy while sounding generous—and evoke a fantasy of community in an atomized population.

The fix is a Universal Basic Income. Everyone needs to have money to participate in the markets freely. When people are desperate for money (like today) they have no free choice. They must accept shitty gigs, and sell their time to Ubers in order to survive!

The only way to get truly free markets is if everyone has a a Guaranteed Income as it allows everyone to have the free choice to say no. To not buy into some bs Uber gig out of desperation. Then you’ll get fair wages, fair competition, and fair prices.

The problem is the ‘chattering classes’ that love the ‘servant economy’ will claim that anything that has to do with Basic income is nothing but welfare, and we’ll just have to suck it up and “pull ourselves by our boot strap”, cause you could come up with the next billion dollar app! Think Elysium, that’s our future.

The common things that cuts across Uber, AirBnb, and a few other transactions that fall under the rubric of “sharing” economy is how individuals are using small technology like apps to monetize **on a temporary** basis a private asset (car or room), in an effort to in the least supplement income. To round out your analysis, you need to explore more the discussion re: asset-based income generation, which had been prevalent in the social justice community in the later 1990s and early 2000s.

In the late 1990s-early 2000s, social justice folks were decrying how very low-income persons remained\remain stuck in the cycle of poverty because, among other things, they lack physical and financial assets (e.g. home ownership as the one big example) that they can leverage to begin to uplift themselves (see Insight Center for Community Economic Development [http://www.insightcced.org/programs/assets.html], Policy Link [http://www.policylink.org/], Asset Building Strategies [http://assetbuildingstrategies.com/].

Uber, AirBnb, and other personal asset-based “share economy” proves the point that social justice folks at Insight, Policy-Link and ABS have been making in an odd sort of way: it’s the working-middle and middle class, by leveraging their own private assets (car, home, funds [ie “crowdfunding”], business space [i.e. pop up] , by “sharing” these assets (yes, for money) on a temporary basis, who are indeed generating **supplemental** income. Why? Because in this age of mega income inequality (where wage pay is nada — if wages kept up, or if good-paying jobs were secure, do you think people would temporarily rent out space via AirBnb? Would the drive via Uber or Lyft? Of course not), it is the working-middle and middle class is facing the SAME stress that very- and low-income people have faced forever.

So, I think you really need to further think about your thesis — you need to go beyond, well, your sophomoric usage of “share” in the phrase “share economy.” For, when you do think about this even more, you will see this part of our emerging economy holds possibility of deep discussion re: the nature of the US and global political economy in the early 21st century.

Such a wonderful and easy to read and comprehend (especially for those of us a bit out of the “sharing” loop, namely the old retired bunch!). I too will pass it on to every damn one! Thank you. Everyone knows on some level that a ponzi scheme has never worked… It’s like chain letters…

Augie, if those things on your blog post are prime examples that there is in fact a sharing economy, then the sharing economy is nothing new at all and is simply the same system as Olivier put it? A hotel chain shares the cost of developing and running a hotel by sharing a room with me for the night, at a cost. If sharing involves paying for the pleasure of the item, then parents across the years teaching their children to ‘share’ the chocolate with their friends or siblings could start to charge for a piece and still call it sharing? Or maybe the parents could charge the parents, either way 🙂

i hardly comment anymore. No one does. We’re too busy building our personal brands elsewhere to spend that hard earned capital on some other platform. But I guess that’s also a symptom of this condition. Great explanation, man. It certainly articulates many of the misgivings I have around the unbridled zealotry attached to the Sharing Economy. And TED Talks. They’re also on my list. It’s time we took a closer look at not just who lives in the halo glow of these movements, but who wins out. And it’s not you and me.

You’re not the only one, Olivier. A few months ago, a TEDx organizer approached me about writing copy for the website. And I mean the entire site. Of course, there was NO budget for this project. I guess I was supposed to be thrilled with the exposure. Or something like that.

Because the bulk of this Microtransaction Economy (a good description, btw) is P2P, that’s where the whole notion of “sharing” easily gets grafted in. But I think you’re right. It’s direct buying-and-selling mediated by tech far more than it is “sharing.”

“cloud” is another one of these made up terms that complexifies accountability. When data is “in the cloud”, nobody really wants to say where the hosting is actually taking place, under which sovereignty aka which laws. Physically it’s still somewhere yet hunting down exactly where is shaded with lack of transparency. It’s changing, slowly

That’s true, although ‘cloud’ is something we can actually put our finger on. “Hosted” would be a more accurate term, but “cloud” isn’t as much of a misnomer. “Internet of Things” (IoT) is the one that grates me to no end. It’s more about Connected Devices than an “internet” of “things.” 😀

Even more fun is that data moves around in clouds. Maybe it exists in several places at nearly the same time. And if it is effectively stored as encrypted, does it really exist in the physical place where it is stored, or does it only exist where it is decrypted?

I had “cloud” computing in 1983, using a VT125 which I used to log into the VaxClusters at DEC to do my engineering work. Sometimes I took the terminal with me on the weekends to the cape so I could work AND get my beach on. Early macro mobile computing no ?

Great read. I can’t help but think that if an older person said any of this they would be dismissed with contempt as being out of lockstep, not understanding the power of the social web, and having a damaged (read old) “brand”. So thanks for saying all this and so very, very well.

Thanks for sharing your insights on these matters. It’s a real pleasure to read.

Your piece was recently quoted in a Danish daily (“Berlingske Tidende”) along side some of my own writings. And here, in fact, they had the impression that you were indeed the “American top-economist”, which I take to be that other Olivier Blanchard (even though he was born in France).

Excellent post, Olivier. I’ve always had so much trouble wrapping my head around the term “sharing-economy” since nothing is actually shared. I live in Boulder, CO and the AirBnB inventory is growing and people are profiting more off of their short-term rentals (see, I called it a rental, not a share) more so than long-term rentals where people actually move here to live here. My big concern is over the next 5 years and what is going to happen to the community here when properties are owned by out-of-staters and they are simply short-term renting it on AirBnb in order to make more money than having a long-term renter.

Lastly, I first heard of the sharing-economy when bike share programs launched in Denver and Boulder, CO back in I believe 2008. I never grasped how these were bike-share programs given that a collective of people were not pooling their funds to buy a fleet of bikes and then using them at distinct periods of time. I guess they get away with “Bike-sharing” since you can buy an annual membership and your first half hour is “free” when you check-out a bike, but you pay a fee (aka rental fee) if you have the bike out for more than 30 minutes.

“Sharing economy” fits in terms of shared liability. Some of these services may be so popular because consumers are willing to trade the protection of the provider’s regulated liability for cost savings. To me that says there are a lot of consumers that don’t want to pay for regulation, even if that means taking on personal risk.

If it was a true sharing economy it would be free or at the very least my payment wouldn’t be compulsory but optional.
When I share things with my friends, which all these apps want you to believe they are a “friendship” zone, I don’t expect payment in return for what I shared with them, so if you want me to “pay” for something in my eyes you’re nothing less than another retailer.

My big problem with the “gig” economy and “disruption” is what happens when you destroy a market?, say for example the Taxi/Uber segment of the economy. What happens when it’s no longer feasible to stay in business as a Taxi Driver because Uber unfairly drove you out of business and all the hipsters that are sharing their cars today have moved on to the next fad, who will drive you places then?

Before you decide to destroy an industry just so yourself and your VC can make and walk away with a boat load of cash, you better make sure that whatever you replace it with is as solid and long lasting a solution as whatever service you’re replacing has been.

Great article Olivier. I’ve had misgivings about the whole “sharing economy” fad for quite some time, and it’s because the whole thing is about software automation at its core. Build a better mouse trap, find people willing to run on it, and make oodles of cash. In the end, aside from college kids and those of us who are desperate for ANY money (no career in mind), it’s working against our own self-interest and actually introducing further inequities into an already imbalanced economy.

Very interesting article. Thoughtful. In many ways, I agree with you — on how these business ACTUALLY implement. I do believe in a more beautiful reality, these “sharing economy” apps are actually meant to bring people who need some service together with someone who is already offering that service. In the case of ride hailing apps (and this is also not new, it’s just new because it could be facilitated in a fast and directed way), wouldn’t it be great if two people shared a car to and from work instead of each driving independently, and the person who doesn’t have the car compensate the person who does have the car? How about 3 people riding the same car in the same direction? I dunno, it’s almost like sharing. Anyway, I don’t take out insurance and a business license for sharing nachos with my friends, even though we share the cost.

It’s that the implementation of these programs has taken a very different tack. “Ride hailing” has evolved into an unofficial taxi service where people might even drive full-time, which is patently not sharing. Couch sharing in the place where owners actually reside (which I can see as sharing), has turned into unofficial hotel businesses which are owned by corporations and where nobody lives full time (patently not sharing). These practices are often encouraged by companies by providing subsidies above and beyond the pure price charged to the consumer.

For me, many of these apps are in fact for the “sharing economy”, but their implementation has drifted towards what you have described.

You’re right to go after the buzz term mythology lexicon. Calling things by a new name doesn’t make them new.

You’re wrong on just about everything else.

Progress doesn’t come from sitting back an waiting for the establishment to realize it needs to change. Yes, the taxi business “should” modernize. They won’t. This is just human nature. We like to hold on to easy, especially easy profits.

Of course it’s not fair to let someone bypass rules to “disrupt” but that is not disruption. To progress, we need something new. New thinking, new methods, new materials and new channels,

Some rules are established only to keep the playing field unlevel. So expect progress to be a bumpy road. Some new things are horrible, if you want every experiment to be like the old ways.. that will just get you more of the same.

As for Uber. I use it because it’s a better experience. I really don’t care if taxi companies, the government and you like it. I’m not calling up a ride to piss you off.

That is not especially modern, to be frank. Your claim that we need new thinking and new methods is fine, that is how business works–but everybody is working under the same rules. It is not clever or new to decide to break the law to beat your competitors. How a grown adult cannot understand that is sad and concerning.

I don’t think anybody would deny Taxis could improve, but what Uber does is not an improvement. The only thing Uber can be proud of is creating a wonderful application, but that is not the reason they are successful. Uber are successful because they are big enough, and underwritten by google, to take on entire countries. If you took an entrepreneur and asked them to create uber, they could not possibly do it, no matter how great they are at writing apps. Rather it is that monetary backing and power behind Uber that allows them to fight Taxi unions all around the world. Uber pay fines of their drivers–nobody could do this without the billions of dollars backing Uber has.

So it is even worse than disruption.

Uber could have been a wonderful company, talking out about fighting for Taxi drivers rights, how they want to improve the industry for them. Instead they’ve launched, for years, a campaign to create worldwide hatred on Taxi drivers–one of the most difficult and disheartening jobs anybody could do. They have created a false dichotomy and managed to convince the stupid masses that their service is substantially different. It isn’t. You get into a car and somebody drives you somewhere. I have taken Uber several times, and in fact was disappointed by the service–the driver was awful, and even creepy.

At the end of the day Uber is not sitting in the car with you. A human being, an individual is, and that is the case whether you take a taxi or an uber.

Hi Warren, just a side note on your method of discussion.
I am amazed how many people talk in dichotomies (black and white thinking) ie good/bad, right/wrong.
I believe that to be more accurate one could simple say you agree with Oliver on the one point and disagree or think he is wrong on the others.
If you ever want a good book to read on this method it is called “You are wrong I am right” by Edward de Bono. Obviously he had your behavior in mind when he wrote it in 1992 http://www.goodreads.com/book/show/98483.I_Am_Right_You_Are_Wrong there is even a neat black and white cover to illustrate such simplistic black and white thinking. This tendency to either overly agree or overly disagree really stifles the conversation by polarizing it, in my view.

Couldn’t agree more. The Uber issue has nothing to do with taxis being slow to upgrade their technology. When I take an Uber rather than a regular yellow taxi in NYC, it’s because no taxi will take me anywhere at 3pm when they’re switching over. Or they are never in my neighborhood in Brooklyn. I’m happy to take regular taxis, but if I need to get somewhere and Uber is the best option, getting from A to B is priority.

Is this a really progress? In the third world countries you can picked up buy any passing private/unregulated car. That’s been for ages. Now its coming to the Developed World.
Uber is just a booking app. And in terms of convenience its no better then the other booking apps that hire cars and taxis use these days.
Its all HYPE, and youngsters just love this thing and they are just piggybacking, when the dust settles it will all be clear, that this was all HYPE.

I find most of this essay to be repeated railing about what to call these business practices and the ramifications of doing so, before finally getting to a (really good) idea for what to call it.

Of COURSE the people who come up with this stuff are going to make up cool, fancy names for it; they are trying to get people to participate and invest in their companies.

And I thank Warren Whitlock for stating what I was thinking while I read it: change in this kind of thing doesn’t come from those with the vested interests.

I am far from a libertarian; I absolutely believe that business should be subject to appropriate laws, but I do believe in a certain amount of self-correction in markets and in innovation.

The taxi business left their lunch on the table and someone is eating it. With our capitalist system, this is how innovation happens.

The way it goes is that there is an unmet need (reasonably-priced lodging, better transportation services) and someone, often using new technology, steps in with a better way to serve it. Things get weird for a while, then appropriate (we hope) legislation is passed to regulate it as necessary.

As Mr. Whitlock referred to, industries that are due for a shake-up are not going to get their act together without some kind of pressure to do so.

Something that is not addressed in this article is the process by which established operators, such as taxi companies, lobby legislators to pass legislation that helps them to maintain their hold on the market and suppress competition. Follow the money and see how much money cab companies and cab drivers’ unions donate to politicians in the cities where they operate. If you think they are doing that just because they appreciate the wonderful “laws which are there to protect them AND consumers,” well, I don’t, I rather suspect that they do it to ensure that the laws favor their hold on the market and that it all stays the same.

I have actually “chatted” with cab drivers in San Francisco, and they were treated like crap by the companies they drove for. According to them it’s a very exploitative industry. Of COURSE they are going to be angry and dismissive about the ride services. As a result of the upheaval, they are making less money. That’s not the fault of the upheaval, it’s the fault of the cab companies who sat on their asses while the world changed around them, just as it was in the ’80’s with American car companies. The Japanese were not the enemy, they were the force of change. We now have cars that regularly last over 200,000 miles, and that is a direct result of the competition and upheaval from the Asian automakers. But at the time there was the same whining about how unfair it was that the Japanese car companies didn’t have to pay union wages, etc.

Just take a breath. This is how change happens, and change of this type has been taking place all through US history. We’re in the lawless phase right now, but we have systems in place to take care of it. The government will figure out how to tax the ride companies appropriately for their use of the public roads. If bad things start to happen, we will figure out how to further regulate the new businesses. Now, however, there will be many more interested eyes on that legislative process.

But this is how change happens…We had the same situation with music. When Napster came along, some complained about its lawlessness, and some cherished the fact that it was challenging the established monopolies and obsolete regulations. Eventually neither Napster nor the existing monopolies survived, but we found new compromises like iTunes, and new regulations. Neither the cab monopolies nor Uber will survive, but this is exactly how change happens. You can’t just get to the new perfect model instantly as you think we should.

Mr. Whitlock, I’ll have to disagree with you there. What you’re complaining about is true: that entrenched economies will drag their feet to avoid the costs of change until it’s required for competition in a fair market. And sometimes regulations can help them drag their feet longer than they should. However, Mr. Blanchard directly discussed how the *good* kinds of disruption make us think about rewriting the rules and regulations so that the amazing new ideas can supplant outdated ones and “dragging feet” becomes a true liability.

The other expression Blanchard avoided (deliberately?) is “black market.” Setting any kind of business up in a civil society requires notifying the relevant authorities and getting some kind of business license. Where Uber and Airbnb, etc. somehow do is bypass that process, setting up an ersatz black market to offer services that already exist (but with the tech edge). The tech companies are simply the pimps of the process and the individuals supplying the cars/beds are the prostitutes, albeit slightly less at risk of being caught up in organized crime.

I can tell Olivier has been in sales by the good command of persuasive language, good links and cutting edge vocabulary, there’s a (weak) case to be made against this kind of ‘new’ (app’d) economy but this article did not persuade me, notwithstanding its erudite charm. There are many points I agree with, such as the sometimes reckless, more than slightly shady ethically and highly rapacious nature of SillyCon valley’s glossy hand in all this, but while the newspeak they use to peddle software is nauseating indeed, the fact remains that they goose change in many moribund, constipated, often corrupt systems that have themselves been monipolising markets, over-taxing consumers and becoming the same problem they were seen to be solving at their inception. Is it any different than when minicabs came along in the 70’s? Cabbies had a cow then too, yet minicabs survived and became legitimised as the poor man’s taxi and things settled down after a brouhaha or two. Or three. Governments will always try and get a slice of whatever people want to barter, even in the peace and privacy of their own home (Lol), and corporations can be worse. There are no easy binaries to all this, but if I want to use the internet to find new friends, I offer them a spare room, where’s the line crossed between my friend making a donation as any friend might/could/should while visiting to help keep the ship afloat, should everything we do be bureaucratised into extinction or sold off to Amazonooglebay? Actually ebay is a perfect example. Sure it’s pissed off a lot of retailers originally, until they learned to open an account and reap new rewards too. I never used Uber, I know many who use bla bla car and love it. What I don’t love is officialism, no matter its ever-touted ‘benefits’ most of which are questionable, to be mild. As devil’s advocation O’s argument stands up fairly well, but the implications are not Luddite per se, they do perversely perhaps have the opposite effect than the one desired. Ordinary people are way ahead of their bureaucracies, twas ever thus. Institutions become corrupt, ditto. So a toast to this supposed ‘scofflaws’ who are simply at the edge of the envelope pushing to see where it can bend. If they catch on they’ll get bureaucratised soon enough, meanwhile remember what your grannie told you, ‘Not all that glitters is gold’ and keep your antennas up and operational! Just because something comes from a startup, government or corporation doesn’t mean they not out to tidlily fleece just the same, people are people for good or ill.

Fair enough. You might feel differently if you drove a licensed taxi for a living. You might feel differently if whatever niche you currently occupy was being disrupted. Maybe traditional taxi services deserve to be disrupted. Maybe you are too secure in your own little niche. But the law of the jungle is neither kind nor fair. I thought it was an acceptable trade-off for civilised societies to balance the needs of the many against the wants of a few. This mania for disruption in the name of ‘progress’ seems to mostly benefit a very few greatly, somewhat at the expense of the many, with benefits being generally either marginal or ephemeral. What did 100 years of Kodak give us? An incredible legacy of photography. Instagram killed Kodak. What has Instagram given us?

No disagreement with your points on terminology or class politics, but I think you are missing a much bigger issue. Even without a 100% level playing field, the economics of Uber are substantially worse than existing taxi/limo suppliers. The people cheering Uber’s competitive disruption are cheering the “marketplace” victory of a higher-cost, less-efficient business model. Uber’s model involves higher vehicle, maintenance and insurance costs, and does worse at matching resources (cars and drivers) against volatile demand patterns (which is critical to the economics of any transport service). Uber’s apparent “success” results from massive subsidies from its early stage investors (who at last report lost $470 million on $415 million in revenue) and one of the most massive PR/propaganda campaigns in corporate history. “Sharing economy” spin is just the tip of that PR iceberg, which is much more focused on the false notion that their “app” is a powerful innovation, that they can offer a better product for less money and the much more problematic notion that there is mass popular support for their lawless behavior.

I love the “emperor has no clothes” viewpoint. There’s one important piece missing from the analysis, though, which is the “pain point” of some (but not all) participants in the Gig Economy. Corporate America has steadily eviscerated full time, secure jobs over the last 30 years through downsizing, financial engineering and offshoring. So while I certainly agree that Uber, AirBnB et. al. need to be playing on a level playing field with others in their industries, there also needs to be a recognition that income insecurity is endemic in the US for a whole set of reasons that have nothing to do with those companies. Let’s make sure we solve the whole problem, not just quash a band-aid that does provide some relief for some people for some period of time.

Warren Whitlock hits on a good point, but let’s synthesize for a moment. First, you’re right and I’ve have spirited discussions with those who think that BnB is wonderful but failed to contemplate that there are also non-monetary costs involved: that great apartment you used on the UWS in Manhattan was in a wonderful location, but the neighbors, who have paid significant money for peace and quiet, are now confronted with the illegal use of their infrastructure by strangers. who may or may not be good people: the BnB location is prime because it is reserved for residential use only, rather than for hotels. City planners take into account multiple interests in zoning, not the least of which is whether allowing certain types of activities within the existing buildings reflects on the nature of the neighborhood. Bypassing these for ephemeral profits is neither good nor desired in the greater scheme of things: you are essentially placing your own interests (as an owner/renter of a BnB residence, as well as those using those services) above those of society, represented by regulatory agencies and the politicians who were elected to implement those regulations.

Now, that might sound like a mighty cool thing to be doing – screw the system, let’s liberate our commercial transactions from oversight by repressive regulations, etc – it’s also a might rude thing to be doing. Yep: rude. That’s what Warren explains: he’s not intentionally being rude, but he doesn’t care (his perogative) that he’s pissing on someone’s parade. That’s indicative (without any pejorative sense to Warren; he’s just the one who brought it up) of a mind-set that is, ultimately, destructive: I want what I want when I want it for a price I am willing to pay and the system should exist to service my needs without regards to anything else. Yikes!

If you think the system isn’t working the way it should be, then change the system. Not enough cabs on the road? Then reduce the cost of medallions and open the bidding process. Back in the day when I spent lots of time in New York, everyone know that there were five ways of getting from point A to point B: walking, subway, taxi, car service and jitney (unlicensed car services). Both taxis and car service were regulated for a multitude of reasons (not the least of which was union insistence that union people were employed) and you asked your neighbors and friends if they knew of a good jitney service: there was always a huge element of risk involved (and for the record: you can call for a cab and also get one on the street, but car services are only provided on call, while jitneys did both) in using jitneys to get somewhere (which was compensated for by being the cheapest).

Now, the real question is: why aren’t these services modernizing? The simple answer is: entrenched interests who do not want them to. There’s a reason why French cab drivers set Uber cars on fire: they are a direct challenge to their livelihoods, and people who rely on those jobs don’t react well to upstarts, largely because they have significant emotional, political and monetary capital tied in to their livelihoods.

There’s a lot more to be said, but not in a comment. Liability concerns in a country with tort law, for one. What do you do when you find that several neighbors are renting out their units to perfect strangers that no one has vetted or checked on? You really expect that someone who spends a lot to have a good, safe apartment in a good, safe neighborhood is going to be thrilled when strangers show up every couple of days and all that they have to show for security checks and references is something someone filled out online? Right.

Spot on article. Amazing to me that people can’t see why companies like Uber are unfair.

Of course everyone loves Uber…
1. The drivers can earn more money without worrying about tax and other obligations…because Uber doesn’t follow any of the rules that would place pressure on drivers.
2. The customers are happy, because they don’t have to pay as much as they would to take a taxi…because Uber doesn’t follow any of the rules that would make their prices higher.
3. Uber is happy, because they get to suck up money from all around the world…because they flat out ignore regulations.

= Drivers, Customers and Uber are all very happy.

How anybody can defend Uber against Taxis boggles the mind. Indeed Taxis could improve, all industries can always improve. You can take any industry and apply the same 3 step process above as long as you bypass laws and regulations and licensing etc. Take the heavily regulated pharmaceutical industry. Open up a chemist in your town where you sell drugs second hand. You’ll make everyone directly involved happy—the workers at your chemist could be paid more, because you aren’t paying licensing, insurance or taxes you can afford to do that. Your customers will be happy–they will pay only a fraction of the cost for the drugs you sell.

There is nothing innovative about a business model that merely decides to ignore regulations. It is not a sharing economy, it is a black market.

I don’t care much about the terminology. But I do care about economic freedom, and the rights of people to do business with each other. I agree that this movement isn’t much about innovation, really. What it’s about is methods for allowing people to do business directly with each other, without the government meddling the shit out of (and ganking a big cut of) every human transaction. Many, if not most, economic activities have become over-regulated, restricted, monopolized, licensed, folded, spindled, and mutilated. You are free to take a regulated licensed medallioned taxi if you like. No one is saying those should be outlawed. But not everyone wants to pay the extra costs of all that, and those who wish to buy and sell rides directly without all the taxes, coercion, and government should be free to do so. It’s about choices — for the consumer and for the producer. For people.

Like the fact that only part of traditional taxi regulation is aimed at social goods like trained drivers carrying good insurance; while most such regulation was a racket designed to limit competition among drivers and send money to local governments. San Francisco has a cornucopia of transpo options, yet ride-sharing flourished there because taxi operators were smugly contemptuous of people who needed a taxi but couldn’t get one because of the legal suppression of supply. And while the writer is probably 98% correct that the term “sharing economy” is a cynical misnomer, let’s not overlook the importance of the 2% extent to which the term is not a misnomer. I refe to the fact that the 20th century consumption driven economy created a culture where everyone in his/her silo should own their own set of you-name-it. The waste and over-consumption triggered by this was enormous. So to the extent that people renting their stuff to others indicates an openness to sharing that The Brady Bunch would not have understood, it’s a positive development.

But indeed Silicon Valley has so far offered nothing on the subject of how fruits of new prosperity can be widely shared in society.

Your analysis is right but your conclusion is wrong. It’s not a fair playing field and the answer is not to apply the same flawed, exclusionary government regulations on these services, it’s to free the incumbents from oppressive licensing schemes that have little to no practical value so there CAN be competitors that they can compete with for your business!

I’m not sure what’s “oppressive” about these licensing schemes. They’re there to protect cab drivers from unfair competition AND consumers from outrageous fares, actually. There’s nothing oppressive about that.

If you’re talking about the outrageous fees cabs have to pay for badges in some cities, that’s fine, but that’s a problem for legislators to fix. (It’s also a completely different issue.) Uber isn’t tackling corruption or usury, last time I checked. You’re conflating two completely different topics.

Sounds like Olivier had fun writing this article! Its well written and some very good points especially around calling it a share economy when its really renting.

Though one aspect the Olivier didn’t seem to reference was the review systems of these sites, as something new ie that a taxi driver or a rental room host are reviewed and can review the customer.

I think this is one floor in his argument given I believe reviews adds a level of accountability and transparency that wasn’t here before! And perhaps its it THE critical aspect that has helped remove reluctance to ride in stranger’s car or stay in a stranger’s house.

Fair point, but you know how reviews are gamed. So… yes, but I’ll put a big fat asterisk besides that point until reviews can be a little more trustworthy. Know what I mean? (But yes.) Thanks for the comment, Steve.

What a horrendous article. I had no idea you were like this. You not only did mess up with everybody financially, you still have the guts to write stuff like that to intellectually support oppression in every part of people’s life.

I think that better than Armstrong the right metaphor is the polyurethane swimsuit that has been created a few years ago. With that swimsuit it was easier to swim fast and make new records, but the Federetion decided to come back to the traditional swimsuit. Apart from the ability to compare with previous performances, there is nothing rigther or wronger between old or new rules. They are simply rules. Of course a market needs rules, but you can change them, you can decide that some rules can be relaxed or remove some of them. You can decide that renting a room or a sit in your car is legal if you pay taxes and you have the insurance without more authorizations. Of course some agents can be damaged by the new set of rules, but many other people can obtain big advantages and the overall utility can be bigger. Of course some people can be damaged but this happened many times in the history and it will happen again in the future. Think about email and postal service: why no one has thought to force every email server to charge a stamp for every message? Maybe some of the people that are taking advantages from the new rules are the ones that has been damaged for years by the old rules that helped the ones who profited from them. There is a third way between old rules and no rules: new rules.

You nailed the reality of the sharecropper economy, thoroughly, and enjoyably.

But, as some others have mentioned, I think you are too accepting of rules and regulations.

Many rules serve only the elite, or were created in very different circumstances, or simply because that was what they thought they ought to do. There has been a raft of recent articles on how traditional city centres—the places tourists love for their character—would be illegal to build today, because of “rules”. Or how energy efficient buildings are illegal because of rules. Illegal to collect rainwater or reuse grey water because of rules.

We do need to disrupt bad rules, and that often involves breaking them.

Other than that quibble, I appreciate your trenchant description of the sharecropper economy—the MicroExploitation Economy.

Nice to see the tide shifting. People got onboard with this without looking under the hood. Not only do these companies operate as though the rules don’t apply to them, they then try to strip us of rules that protect us but inhibit their companies from growth. I.E. Air BnB in New York – trying to change rental laws that actually make Air BnB illegal as the law is currently written, but the law was put in-place decades ago to protect people from zealous landlords that wanted to turn property zoned for residential into hotels – which it was not zoned for.

Air BnB has lead an intentionally misleading campaign in New York, galvanizing Air BnB customers to fight on their behalf, when the people don’t really understand what the battle is about – they just think that Air BnB is under attack. And when I very clearly asked a campaigner about this at the beginning, she lied to me about it- though I give her credit and think she just didn’t know what she was campaigning for.

And then once they have such marketshare, the founders – Uber anyway, think they are invincible. And their lack of ethics translates to the workplace itself.

It’s a mess, really. It’s also completely messing with the sense of community and what it really is to share and help one another – but I’ll save that for a blog post I’ve been meaning to write.

Thanks for writing this! I’m sure many people have thought I was a bit stodgy as well for critiquing these companies over the past few years.

Yep. I’ve run into the AirBnB thing in NYC too. It’s unfortunate that people are so polarized over it when everyone could make money (properly and ethically), but that’s kind of how the US is right now. We’ll get there, eventually. But yeah, it would help if the folks at companies like Air BnB and Uber were a little more upfront and trustworthy right out of the gate.

An excellent piece. I agree with most of it but find it difficult to agree with all.
See, I lost my job when the industry I trained and worked in for 20 years ceased to exist as it was. Yes, I should have probably spent more time trying to keep up with the rapid changes that were making my skills redundant during that evolution, but I’m sure you’ll agree, the real-life effects of the cyber economy weren’t entirely predictable. All that disruption!
One lucky thing – a few years before, I stumbled upon a story about a site called AirBnB, which I’d never heard of. It seemed like an exciting idea for bringing in a little extra cash to keep us afloat, so I put our downstairs room on it. Soon we had guests. They were great people and we got a little much needed coin from making them happy. Our room’s price is in the low end of the spectrum, so many of the guests were right on the edge of being able to afford a vacation or not. Our room often made the difference. With our cheap nightly rate and comfortable simplicity they were extremely happy with what we offered and wrote positive reviews. So we got more bookings, and then more and more and now, two to three years later, our little AirBnB room has literally helped to keep us afloat. Many months it pays our mortgage, which is hugely useful considering I’m still unemployed – aside from regularly changing bed sheets and cleaning toilets for incoming guests.
Bottom line – It has been a godsend for us.
Now, politically, I come from the left. I’m instinctively anti libertarian for the same reasons you outline in this feature – i.e. it’s just selfishness/greed dressed up as some form of government ‘oppression’. Who cares if there aren’t any fire regs, roads aren’t built safely, hospitals don’t have to meet certain standards – it’s just the fascist government oppressing us, right? No. That’s just bullshit.
And I am also a respectful human. I would in no way want to rip off or endanger the guests who stay in my house. My standards are high because I don’t want anyone saying we scammed them when they booked our room. I actually don’t know what the all rules would be if I was running a small hotel, but I can guarantee our standards exceed them. I also pay government room tax, of course.
And the local companies that I’m undercutting by renting my room out are, by and large, big hotels. They aren’t other families struggling, like mine – they are large corporate entities or people I would call welI off business people. Do I feel guilty about competing against them for low-end overnight guests? No I don’t. If people prefer my place because it’s nicer, and if it’s safe and complies with high standards of … everything, then why I am I doing wrong by using AirBnB?

So while I agree overall with what you’re saying, I don’t agree with the built-in assumption that those us who gain from this micro transaction economy are in some way gaming the system and that we’re the bad guys.
It’s an economy, stupid, full of knock-on effects – some effects are bad for some while good for others.
Like I said, I agree with most of what you say but don’t want you to put me in the category of a band-wagon jumper, a libertarian, a slimeball union-buster, a start-up/disruption junkie or a danger to the public. I’m a decent guy trying to keep my family fed and housed, and one of these new companies opened a door that saved our asses.
Thanks!

Have you ever used Uber, Lyft, or Airbnb? Do you appreciate how amazing those services are for both the customer and provider? I’m a happy customer of all 3, and a provider on Airbnb. If those companies are breaking regulation, that means there’s something wrong with the laws and they need to adjust to keep up with these businesses and consumer demand.

Also, phrases like the “sharing economy” that you’re criticizing were not invented by the companies, but actually by journalists and other “experts” who are studying and reporting on these companies and the trends they are setting.

This is a quote from a book called Founders at Work written by Jessica Livingston, a partner at Y Combinator:

Innovations seem inevitable in retrospect, but the time it’s an uphill battle. It’s curious to think that the technology we take for granted now, like web-based email, was once dismissed an unpromising. As Howard Aiken said, “Don’t worry about people stealing your ideas. If your ideas are any good, you’ll have to ram then down people’s throats.”

Your argument: “If those companies are breaking regulation, that means there’s something wrong with the laws and they need to adjust to keep up with these businesses and consumer demand.”

So… if I shoot up with EPO and HGH leading up to the start of the Tour de France (breaking regulation), does it mean that there’s something wrong with the laws, and they need to adjust to keep up with athletes’ and sponsors’ performance demands?

That isn’t how the world works, man. You can’t justify cheating and driving unfair competition because your need to make some bank somehow outweighs your regard for the law. Laws against robbing banks don’t become irrelevant and antiquated just because I fancy a little robbery. Know what I mean? That’s just a bad argument.

yah some people love terminology and band wagons, and I agree that a dereg’d economy eventually leads to imbalance and shrinkage of the middle class. but, here with these microtransactions like uber, people are paying one another, which does not favor one percenters, except for the very few people that launched the app.

I did like your illustration of the downstream effects of all microtransactions that circumvent taxation, leading to the unraveling of the already insufficient socialist practices in the US. But, these app-users can and should be taxed, so I dont see how these microtransacting companies are more destructive than, for instance, amazon… they just need to be held responsible; and it’s totally possible.

Thanks for the post!
I was beginning to think I was the only outlier in this “trend”. I have tried recently to say something on that line – not even near as eloquently or argument-rich, but still – to almost no avail…
Yeah, super-cool to fuck the system. But then who’s left to protect us and, even more importantly, our “oops, I didn’t realize you were there” neighbors?
On a not-so-far-out side-note, here in Brazil we have universal health care system (of course it’s not wonderful, but it exist and people actually do get care “for free”, aka, through taxes we all pay so that we can all have it), and – by the way – which covers about 80% of cancer treatments (even those from people with private health insurance which “forgets to tell their customer” they are running their treatment via the universal system) and HIV drugs. Now imagine what will happen if we start to cut down “all of them pesky taxes and all those absurd licenses for running this or that enterprise”. This is not to argue in favor of said system, only to point out that while people in Brazil use them – even without knowing it, in some cases – we seem to forget that we are paying it, and if we cut too much of that annoying tax tree, there will be no branches to support the leaves we enjoy so much. And, believe me, it takes only one relative or friend-of-friend living on HIV-drug cocktails to see how much more any of us would have to pay individually if worst come to worst.
Now that – universal care system – is a sharing economy. We all share the burden, so we can all share the service. No matter whose turn is it. I know, not so fun/sexy as seeing “in real time” the few dollars you just saved on that Uber instead of a cab (which, to be honest, is not always the case, if you do the math in some cities).

What would be interesting, though, is having local co-operative tax companies that use Uber technology, while Uber charging a reasonable fee rather than the current extortive one. THAT would be “disruptive”. 😉

You’re a bit confused. It isn’t the libertarians who believe in Utopia, it’s the statists that believe economies can be managed and that regulations do good instead of harm while denying the inevitably of the law of unintended consequences. Regulations controlling taxis and hotels, for example, were put in place with excuses of protecting the public but have ALWAYS afforded all their protection towards the incumbent organizations, grown government beauracracies, while hurting competition and consumers. Libertarians recognize that Utopia isn’t an option and that free markets are eventually the best way the level the playing field in as fair a manner as possible. The success and growth of companies like Uber and AIRBNB are due to 1) their ability to provide services that are in great demand, and 2) their use of individual initiative and technology to route around the false assumptions that justify the existence of these bad regulations in the first place. The solution is NOT to create new regulations. The solution is to repeal all these obsolete and damaging regulations which now impede the classic businesses from competing in this new economy. One would think this is rather obvious but then one would think that it’s clear that Utopia was a statist creation if one ever bothered to read Plato.

Let’s be clear (again): The success and growth you see (perhaps more the latter than the former) is also due, and in no small part, to a successful effort by these companies and their users to circumvent local laws and avoid paying certain taxes. Get those companies to comply with the law, and may the best model win. I’m all for that. Right now though, they’re way outside the bounds of fair competition, and the only reason they haven’t been forced to comply with existing laws is that legislators aren’t competent enough to even know what to do about it.

Good article. Talking from a Brussels perspective, I mostly take Uber drivers because of the service. Official cabs give louzy experience, mostly because the only thing they are doing is bring you from one point to the other. Meanwhile they leave the window open because they like it, talk to their family & friends during the ride etc. Most of these drivers rent the car & licence for a fix per day price. Officially in Brussels a cab driver makes 25€/day in fair ride. Who believes that? But probably the one who ownes the licence is making most of it. At the other side in July at 2 AM I paid 4€ for a short ride home. This is really not enough to be a faire price for the service I got. Certainly if Uber takes it’s part, before the driver can start deducting his costs… Probably both rules sets should come together a bit to have better service, at better conditions.

You are right. Warren is right. Everyone commenting is right. The thought of “flea market of jobs and assets” came to mind (you mentioned eBay). A sort of secondary market that can provide a solution at some level, with micro-transaction that allow trading excess capacity with little provision for warranties.

Great but thoroughly inappropriate as a “system solution”. If a simple cool opportunistic idea is driven beyond its design envelope by investors and media it is bound to go astray. For sure an app enabled transaction system is far from a public service, yet when it reaches the scale it has, it must deal with it as you rightly say. There is simply not enough design of the various levels that come into play when Uber, etc pretend to become real services on a permanent basis.

If citizens take as flag of Uber, etc one must ask why is this possible. What led to this? The fault is really with the old systems and city administrations etc that are ineffective in functioning as cauldrons for synergies and work among their citizens. The city system is in most places sterile with little collaboration operational systems in place, unable to catalyze changes that would make sense within the local context. Totally inappropriate to the times and insufficient to deal with the systemic crises we face as a civilization pushing past all known planetary limits.

If this were not the case, Uber and the lot would not have the traction they have. Moreover, citizens would not be so gullible to fads if they had real opportunities to collaborate and hack at the boundary conditions

On the point about rules being for the good of people, where they suck when you’re six but then you later realize the reason behind them.

I think there’s a way to create incentives, instead of rules, that have the same function, but taste better than flavorless steamed vegetables.

One cool benefit I see from a global microtransaction economy, is that it gives people a chance to explore new professions at a low barrier to entry. A student in a rural area with no graphic designers in his or her town to learn from, can become a graphic designer or a software engineer, starting with online classes and low paying gigs on Fiverr or Elance to build up experience and a portfolio. The problem, like you say, is that prices are driven down and the benefit of flexibility is lost to the struggle of job insecurity and low wages.

Is there a way that these microtransaction economies don’t have to nullify high skill, high quality, professional work?

Regarding the disruption and disregard for rules, I think it offers an opportunity to create well-designed incentives – that have the same function as these old rules, but taste much better. The carrot and not the whip.

For example, people can explore new professions with low barrier to entry. Arguably, it lets people find jobs that they are good and enjoy, instead of working at the job that was most available in their area. So I can be a graphic designer one month and a software developer the next month. The problem is that wages are pushed so low with these microtransaction economies, that there is no way to move past entry level.

So the question is, how can we benefit from the flexibility, and also allow people to transition to platforms that support high quality, highly skilled and professional quality work – at higher wages, and more security for the worker. It’s possible, but it’s not being done yet.

I agree with you that the playing field must be leveled, but don’t agree with the way you think it should be done.

Using Uber as example, leveling is really simple. For starters: All drivers have to licensed and they cars must be road-worthy and registered. If I’m driving next to you or coming towards you, there is no additional requirement. My life is not endangered by the fact that you have a passenger or not, regardless of whether that passenger is paying you or not.

That there is an insurance component to this, is a different, although not unrelated matter. It can be solved in two ways: Either the passenger insures himself against an incident or the driver insured himself again compensation claims from passengers should something happen to them. However, that does not call for the heavy regulation and collusion that taxi drivers are operating under in many instances. A lot of it exists merely as a protectionist scheme to compensate for lousy service.

Therefor leveling the playing field, means scrapping the loads of crap that regulates taxis. That is really what Uber is exposing. The same goes for AirBnB and others in “disruptive” space (for lack of better term then).

I really don’t care what you call it either but I tend to use the term excess capacity when referring to it as well. Sure, Uber, Lyft, Airbnb, etc… don’t follow the rules out the gate. I am sure taxi companies did not in the beginning either. The barriers are too high for individuals to operate like a taxi company and progress (and I do believe using excess capacity is progress) requires that laws adjust.

The problem is on both the government and the private companies side. Some governments overreacted and caused others to follow suit. Companies did not partner enough upfront to make the transition more seamless. The fact is that most people have been taught to ask for forgiveness when dealing with government because they will often get undercut by someone who does not follow the rules if they don’t.

We are only talking about these issues because the effect tax dollars. I am sure everyone thinks the world is better because of Wikipedia and services such as Lumoid give people access to technology that they can’t afford and often do not need to buy. These any many of the excess capacity services that provide extra value that is not currently in the market. Sure it eliminates some jobs but that is progress and new ones will be created.

Your argument is based on the assumption that all laws and regulations are perfect and never need to be changed. You call Uber “piracy” because they refuse to involve the government bureaucracy in something it should not be involved in. If a person wants to get a ride from one place to another, why does the government need to be involved in that decision? What gives them the right to decide who you should ride with and how much you should pay them? (Interesting how the government makes this decision for you based on who pays them the most, isn’t it?)

The fact is, government bureaucracy has violently expanded way beyond its purview. The definition of government should be “for the people.” Yet the bureaucracy, media manipulation, corruption, bribes, etc has taken the control away from the people. Now, the people are taking that back. They are collectively saying “Uber’s model is better than this corrupt, bogged-down, stymied taxi model set in place by taxi companies colluding with each other and the government—leaving us out of the process completely.”

This is a clear vote for change, by the people, for the people. Since the government has made public voting largely useless to actually decide these kinds of issues, we now vote with our apps and our wallets. Uber is only helping give us a voice to say “this is wrong: it can be better, and we want it better.”

No, “odbol.” My argument isn’t based on that assumption at all. Why on Earth would you think that?

My argument is, however, increasingly based on the assumption that a significant portion of Uber fans spend way too much time listening to so-called “libertarian” pundits.

Tip: if you believe that government is somehow more “corrupt” than the private sector, or more dangerous, or more invasive, or more “in your business,” you probably need to take a step back and look at the situation again.

Maybe laying off the koolaid might be in order here? Less Glenn Beck, maybe? Uber isn’t helping give you a voice. Uber isn’t about ending “media manipulation” and corruption, and giving “control” back to the people. Uber is just making money. It’s a business. Its objective isn’t to build a better model or foster a populist revolution. Its objective is to turn you into a paying customer and put cab companies out of business.

The issue isn’t in the idea of the “sharing economy”, (which you are correct is not sharing but renting, either your time, or your possessions or both, to convert them into capital). Which is also the complete ideal of capitalism that you love so much?

You argue for strong regulations for individuals, and yet completely disregard the fact that the owners of capital are able to exist above and beyond the regulations. Yep the folks using uber are paying for a ride from someone that does not own a medallion in a city where one is required to operate a cab. The cab company that owns a medallion in the same city is not paying the cab driver a living wage, and is abusing the drivers in ways that are documented in numerous ways. (An interesting side note was that when I did take a cab instead of an uber ride recently the cabby and I talked about how much better the cab service had gotten, how the cab companies had to step up their game, have cleaner cars, and pay their drivers more because of the competition for both fares and employees generated by Uber, Lyft and the like.)

I loved this paragraph:
“They protect small, privately owned companies from being smashed to bits by giant global conglomerates and fraudsters. They protect full-time workers from losing their jobs to cheap and/or disposable part-time labor. They protect water quality and air quality and food safety. Everything from speed limits in school zones to building permits is there to protect someone from getting hurt. Sometimes, those rules protect our physical safety, and sometimes they protect our combined economic safety. If better controls over bank practices had existed pre-2008, we wouldn’t be in a recession right now. If better controls over pollution and greenhouse gas emissions had existed for the last 50 years, we might not be dealing with drastic climate change right now either. Rules might seem sucky and unfair when you’re six years old, but for the most part, they’re what ultimately holds our civilization together. They’re the mortar. Let’s not forget that.”

It is exactly like the rant of the six year old. Because you hit every single one of the things that the regulations are not doing, and have been prevented from doing by the very governments you want to do them. Unions used to prevent people from losing jobs to cheap labor, and demanded a fair and equitable living wage. The capitalists in our society dismantled the laws that allowed workers to form unions and collectively bargain. Small private companies are consumed raw by large corporations who are subsidized by all of us (workers at Wal-Mart?), when those same major corporations do not pay any taxes, or in most cases are subsidized by our government. (pick an oil company that makes millions of dollars a minute, yet none of them pay taxes, they are given grants and subsidies every time). The fact is that the mom and pop businesses are drying up and have been for some time. (head downtown in any small town in the USA what do you see when you look at all those closed and shuttered building that used to be mom and pop stores? Why are they gone, why can’t they compete?) They are already stomped on by multinationals. The current congress wants to get rid of the EPA. Yes all those things are checks on capitalism, and every one of them is being eroded, or completely removed. The micro trading economy is not what is eroding the laws and checks on capitalism. The rule of law and of the common good is shot to hell by the big companies, the paid lobbyist, the career politicians.

My favorite part of that paragraph though is about the banks. If only the banks had ANY oversight, or ANY controls on them, they wouldn’t have been able to steel and the money and collapse the economy of the world. The laws still aren’t there, why because of the Micro Trading Exchanges we are doing when we get an uber car? No I don’t think so, I think it is the Millions and sometimes billions of dollars that the banks are lobbying and buying congress with.

Capitalism is the rule of the jungle, you like it, but you want it to be fair. You can’t have it both ways. Capitalism is all about capital. It is the only thing that it is about, the only thing that matters. Poor people not able to raise capital have no value in our society, capitalism is the law of the jungle. He with the most money makes the rules and destroys everyone who has less. Is that what we want to be as humans, is that all we are capable of? History says yes, we are far more cruel, violent, and abusive than any other creatures on this planet.
You are right it is a micro exchange community, or a trading of crumbs between mice. Yet that is what we are left the crumbs that fall off the plate. What is this micro exchange avoiding playing by the rules costing each of us? Only the same crumbs that we are trading between one another.
So if I choose to give my crumbs to a Uber driver instead of a Cab driver because the Uber car is far cleaner, the driver speaks the same language I do, and get me to my destination without talking on his or her cell phone all the way to where we are going in a foreign language, I am contributing to the downfall of western civilization by not using a cab company that bought it’s medallion? Maybe…. Maybe not. Do I believe that because the uber driver is a single serving provider that I am cheating the government out of taxes and fees that would be paid to it by the larger cab companies, the insurance companies, and the rich folks that own them? Nope, sorry the little guy is just as likely to cheat the system as the big guys. As a matter of fact the big guy has a better staff to make sure he pays less taxes than his secretary does, and makes sure that is multi-million dollar company never pays any.

The shot of no retirement for you is a reality already. Even for those people that worked their whole lives for a company that had agreed to give them a retirement package when they retired. When it came time to pay up, the company told the government they couldn’t pay up, and keep their CEO’s salary at several million dollars a year, so the government told them they didn’t have to. Bye Bye retirements.
Not enough money to pay the police, street sweeper, or the like is the reality in most cities in the country already. This is done, and it wasn’t done by the Micro Exchange economy, it was done in by the big corporations, the lobbyists in congress, and most importantly by the people that voted for representatives that act against the good of the common people.

We have all already been sold to those with the most capital, the deal is done, trading crumbs between ourselves so that the bigger guys don’t end up with those crumbs as quickly… Silly, and pointless, but then again so is life.
However every drop of water in the ocean makes a difference is your reasoning here. It is true, so instead of using Uber tonight, I should call a cab wait for a couple of hours for it to arrive, (If it ever does) pay more money to sit in the back of a gross sticky mess, with a driver that can’t figure out where I want to go, or worse yet yells at me to get out of the cab when I tell him that I want to go from the City to the East Bay at 10:00. ( Or tells me that he can’t take me to my destination because his company does not pay the specific tax that my local municipality applies to Taxi Cabs, “Could he just drop me off in Oakland?”) Would that be more ethical because the fees and taxes that might, or might not be paid by the cab company? Instead I could click on my phone, get an Uber that knows where I want to go before he comes to pick me up in a nice clean car with inane but pleasant conversation across the bay bridge, knowing that I am cheating the cab company out of my fare, and my local government out of the money that they might or might not have collected had I taken the cab? There is an ethical dilemma here, is my doing the “right thing” and being personally penalized for it going to make a difference in the society that I live in.

Like I said, if Uber properly licenses its drivers, properly insures its vehicles, obtains the adequate business licenses, and observes local taxation and consumer protection laws, then yes, may the best company win. I’m all for fair competition. Emphasis on “fair.” There’s a reason cabs are bonded and licensed.

My question is, what exactly is so terrible about “cheating” within our current system? It is already skewed to be harder for women and minority groups. To be fair, these services tend to benefit young white people who already come from privilege, but a business that provides housing via individuals while traveling at a lower cost than hotels… it means that traveling becomes POSSIBLE for people who could never afford hotels. At the very least, there is a potential for benefit to less privileged people, which does not exist in the hotel world. As far as Uuber goes, taxi driving isn’t exactly a guaranteed income either. Most of the guys I’ve known go from good times to hard times overnight. Creating a way for people to do some small time taxi work without handing the government a huge cut is a great idea in my book – the customers just need to sign on knowing that the person driving them might be a lunatic with a broken car, and maybe the taxi drivers should hop on too, get the highest ratings on the whole site!
Sorry this isn’t more carefully thought out, I know I’ll forget if I click away, so I wanted to say something, even something rather poorly worded. I would just like to see folks making such intelligent and well-thought out critiques of modern fads to also consider the flaws in the current system. There are not only flaws in taxi drivers “updating,” but in the exclusively part time work opportunities taking over below a 4-year degree or the rash of terminating long-term employees to hire less expensive and less skilled recent grads a few years back. I, for one, have been recently looking at Fivver because I get sick to my stomach after 10 years in retail management, when I am told that I need to be personally invested in the well-being of a company that blatantly pays their employees such a low wage that most of our new hires quit within a week when a different job offer lands, and most applicants never return after their first interview. For the working class, finding income that pays a consistent wage takes more than landing a job with a real company, paying all the usual taxes and fees. That company has to like you enough to give you consistent hours, and periodic raises, and be willing to work around your other job(s). These “gigs” may be reflecting an unhealthy social obsession with wanting everything to be at our fingertips (note: smart phones in general), but they also reflect a real trend towards not keeping full time employees in the service industry unless absolutely necessary. I, for one, figure that the people performing the services should get to set the terms, and that’s what a lot of these sites offer.
Essentially, I don’t understand why this is the big deal. The trend in the entire service industry of treating employees like chattel is a huge issue. These sites…. all they do is extend the unpredictable income of the waitress to some intern who just wants beer money, all the while giving that intern the right to kick the jerks out of the car/house because they have rights that a waitress almost never has. Just some thoughts.

Dear Olivier, thanks for “sharing” your thoughts.
Apart from the lexical question, and from a practical standpoint, the taxi services in most cities all around the world are terrible. That’s probably because their business model is wrong, there are no incentives in place to provide a better service. And, back to basics, Economics is all about incentives.
Companies such as Uber and AirBnb should have their services taxed, as any other company. And even so, they will strive by far. Mainly because they offer a great customer experience, and if not, the service provider is out of the game.
The superb economist, Olivier Blanchard, would be dismayed from reading your post.
All the best,
Marcelo

“Tip: If you really want to be a rebel, make your idea so great that people will want to rewrite the rules. That’s the difference between a change agent and a cheater, and it’s time we started making that distinction.”

Isn’t this exactly what’s happening with Uber and AirBnB? People like Uber so much that when cabbies complain about them not following the same rules, the response is “then we need to change the rules” ?

When Uber drivers are properly licensed and their “service” properly insured and bonded, there will be a level playing field. Then, may the best company win. This isn’t just about rules. It’s about bypassing laws in order to cut cost out of the model, which fosters unfair competition.

Great post: I usually think by myself, but I found myself appreciating the idea of disruption in this Uber and AirBnb thing, probably because something inside of me desires to break the rules as they are today in our world, where everything needs to be ruled, incapsulated, legitimised by superior authorities that claim to be democracy and they are only powerful lobbies. But you have a point: it’ s not “sharing”.

Good post. I do miss one aspect of this, though: it does seem that regulators have been slow to examine the new tech to design more efficient regulation. Uber should pay taxes and follow regulations. But they do have better cars (in Bogotá) and drivers. And charge higher prices. Thay should be able to pass any required tests and pay all taxes and still work. But the regulation hasn’t evolved.

So maybe at least some of the beef should be with the obsolescence of current rules and the comfort of rulemakers, not only with the rulebreakers. And certainly not with the existence of rules per se.

Yes, they have been slow. (Aren’t they always?) But yeah, that’s what I am saying: If Uber wants to change the model and “beat” taxis on their own turf, it needs to get the right licensing (and insurance) for its drivers, and vehicles pay the appropriate taxes. With a legal, ethical, level playing field, may the best model win.

I generally agree with this article and especially with it’s comments on the sharing economy and use of the term “disrupt”.

However, one thing I will say about Uber, and why I have any mixed feelings at all, is that it does service areas where it’s hard to get a taxi or you have to wait forever, Whenever I can just hail a cab, or stop by a local office, I do. If I am in the boonies or an undesirable part of town, I have used Uber on a couple occasions.

hmmm, i thought i liked this website and your articles, partly because of the insightful comments. if you’re purposefully not approving my previous comment because it disagrees with your point… we’ll i’m not going to read here anymore.

Awesome piece! There was a piece on Slate’s Future Tense blog a few weeks ago about how Uber “marketplace” is not a reflection of actual, existing market supply. Rather, it is a statistically-derived projection of expected supply and demand. There are a lot of valid reasons for this approach (addressing market failure due to spatial mismatch of demand/supply), but since Uber stands to benefit from both sides of the transaction, the effect is one of creating something like spatial arbitrage. Since this model is “algorithmic”, one *could* argue that if they profit, it’s just a side effect (e.g. the statistical arbitrage that benefits casinos). However, since they are creating the spatial imbalance through an app that is commonly understood to represent an actual, existing market, calling it arbitrage is a generous. I prefer wire fraud.

Congratulations to Jeff John Roberts. This is the best and most comprehensive discussion I have seen on the distortion and misunderstanding of the sharing economy. The reference to The Guardian article is spot on. Kalanick and his ilk are making a mockery of the Rifkin’s Third Industrial Revolution.

Cab drivers who are so upset at UBER for stealing their livelihoods are not only pointing their fingers (and pitchforks and firebombs) in the wrong direction, but they should consider putting their money where their mouths are and stop shopping at Walmart. Most of them miss the irony. UBER isn’t the enemy. UBER is the latest smarmy opportunist in a LONG line of smarmy opportunists. Many of whom write the laws that our governments peddle as their own. UBER is the end result of unregulated free-market capitalism. Really, if any of those avidly against UBER (AirB&B etc…) took a moment to reflect on where they buy their underpants and lattes, they’d realize that they’re as much a part of the problem as the UBER they loathe. UBER isn’t the enemy, the system that birthed and nurtured it is.
I really agree with a lot of what is being said in this article but it’s a bucket of water against a well established inferno. Pointing out this recent paragraph in the latest chapter in 40-60 years of a problem is arriving just a little late to the game. Here’s the thing, EVERYONE is demanding things be cheaper and cheaper because EVERYONE is struggling with less and less because NO ONE has decent jobs because NO ONE is willing to pay for things because EVERYONE wants things cheaper and cheaper because NONE of us have enough money to get by because our system is BROKEN.
So, maybe this ‘shared economy’ (whichever ass-birthed marketing jargon you want to call it) BS is the step towards the next economy. Maybe this IS the thing that will make us all step back and say ‘wait a minute… something isn’t right here…’. I doubt it because, y’know… ‘Kim Kardashians moistened buttocks’ and Chinese underpants are on sale again!!!… but I have to hope.
I’ve taken one UBER ride, on my friend’s dime, the minivan that picked me up had two child-seats in it and a haggard looking dad at the wheel. None of us are the enemy and we have to ALL get together to fix the system that pits us against one another rather than storming the gates as one.

I call it the, “No one can afford to own anything economy.” Seems to me the problem is one part shrinking wages of the lower classes, and one part government inability to adapt to the speed and mass of the internet. When the middle class no longer has to rent out their car on the weekends to make ends meet, there will be no one left to drive this ride sharing economy.

Great post which has expressed a number of my concerns far more eloquently than I had previously been able. If you haven’t heard it already, Benjamen Walker did a series of episodes called ‘Instaserfs’ on this very topic recently on his Theory of Everything podcast. Really interesting to listen to, if rather disheartening – I recommend checking it out.

That’s a great article. But cheating the authorities is a problem that should be blamed on the authorities themselves. If they made it easier for people to start and run small businesses there would be more competition and higher quality. It’s the authorities’ job to prevent the bad effects on society by facilitating solutions to give people what they need.
I am however shocked that these new services are not rejected by the population purely for safety reasons, at least the renting part. Even if I had the childish desire to break the rules that others seem to have, or if I were desperate for a cheap host (I always travel on a small budget), sleeping in some stranger’s house would just be irresponsible. A hotel leaves paper traces and is regulated, the owner can’t very well risk losing his livelihood…

It’s really clear and correct definition about ‘Renting’,’Sharing’ and “Collaborating’. Especially, I like(?) the word “the Microtransaction Economy”. And Olivier, would you mind if I can introduce and translate in Korean on my blog? It would be great to share your opinion with Korean because there are numberless people misunderstanding about ‘Sharing Economy’. Best,

You give short shrift to this: to what extent are two individuals at liberty to negotiate and make agreements that primarily concern only themselves?

It is not mere neo-libertarianism, as you wrongly put it — as if individual liberty is a fad.

Your assumption — correct me if I am wrong — is that individual in public life must be regulated for the benefit of the mass. Would you say that two gay men ought to be forbidden to marry or even to hold hands in public so as to maintain public morality (obviously beneficial for all)?

Liberty is not anarchic, as you imply. The oppresive nature of our bureaucracies as currently constituted must be altered. And they are patently incompetent at accomplishing those things you suggest they are good at.

And this is just the beginning.You should see the hype around the disruption just around the corner for education. The Google supported “Alt School” has been touted as disruptive; after fashioning it’s pedagogy on work done by Progressive and constructivist educators nesrly 100 years ago.

Greetings from Whistler, B.C., Canada, where many businesses in the resort are struggling to even stay open because low income housing rentable by minimum wage employees is an an all time low due to airbnb rentals, spec real estate, andmultimilion dollar ‘cabins’ owned by the uber-rich ( many actually tech stars such as that dude who invented angry birds and a flatscreen tv wall-mount inventor, etc.) … Due to the lack of affordable housing, with every spare closet being rented for more than it is worth or viable to live in, I have friends who are renting out their rental spots and sleeping in parks or on friends couches just to get by. This will change in the winter of course but I suppose I should come to my point: semantics aside, let’s focus on the fact that the beaurocracy and democracy themselves are broken, and the economy is changing so fast that it seems ludicrous to even have faith in the laws and regulatory powers of the past.

Great, thought provoking article. I think you are bang on the money in much of what you say.

A few observations, if I may:

1 You’re right, of course, that in much of the discourse about the new economy, there is a disconnect between the hype inherent in the language and mundane reality. ‘Disruption’ should be a value-free term that describes an event. Something is disrupted or it is not. Instead, ‘disruption’ has become a code word to ramp the value of tech-based companies. We’re using it wrong.

2 I think that part of the problem is that tech innovation is easy – in comparison to business model innovation. Apple’s stratospheric growth in the past 10-15 years has much less to do with the fact that its tech looks great and is nice to use, and much more around the fact that it was able to create and own a music and digital product marketplace that capitalised on this tech. Tesla’s biggest problems aren’t technological: they are around getting a new business model (retail sales and a charging infrastructure) in place. New business models are disruptive – tech, by itself, rarely is.

3 For example, in the UK, we have had a minicab industry that has been thriving for many years. You phone the cab company. They quote you a price and car comes to pick you up. The driver is driving his own car. They are required to be insured for private hire. It’s a very well-known and established business model. As far as I can tell, Uber is the same thing, but uses an app, not a phone. Disruptive? Not really. I can’t speak for the US. Maybe it’s new there – but it’s not a brand new idea.

4 As far as I can tell, the ‘sharing economy’ is just (still?) what we used to call the disintermediated economy. The business of brokerage of services – transport, accommodation and so forth – is, I think, what is being disrupted by tech. People with services to sell can now market to, and transact with, consumers in ways that are quick, easy and cheap. This makes it possible for individuals, and not just companies, to offer and deliver services to consumers. In many cases, it removes the need for companies be involved in the transaction at all. So far, so Ebay. As you point out, this isn’t sharing: it’s selling services.

5 You make a series of observations concerning the inequity of regulatory burden: how the ‘disruptive’ providers have an unfair competitive advantage over established players because they appear to be able to get away with ignoring regulatory compliance and the protection that this affords consumers. I’m not sure that this stacks up. In the long term, the market will step in to increase consumer protection and this will be paid for by the market. The wild west anarchy that was Ebay when it began has now been addressed by Ebay and its competitors who now step in themselves to provide consumer protection. This protection is paid for, directly and indirectly, by those who use these markets. It’s not perfect, but neither is regulation. In the short term, however, the disruptors do have an unfair advantage, but the price of of this advantage is the higher risk borne by their users. It won’t last. The platforms, such as Uber and AirBnB, will have to become quasi-regulators themselves or else horror stories from users will kill their brands.

6 A corollary of your point about regulation, however, is that the regulators are going have to change what they do. The business of regulation is not one that is known for the quality of the customer experience, either by those regulated, or by those who need its protection. The business models for which regulation has been designed are changing – and regulators need to get better at accommodating this. Despite what I said above about the market sorting things out, above, it is impossible to believe that services that carry a risk to the consumer (like taxis or accommodation) will not require some minimum regulation. So regulators and the market will both have to move to protect the consumer. Both will have to be paid for. Over time this will reduce the current apparent cost advantage that some claim the disruptors have.

7 More challenging, I think, will be the point you raise about the gig economy, and the spectre of labour practices reappearing from one hundred years ago. Services provided by companies are traditionally covered by contract law – with the assumption that companies can afford lawyers and have some power to propose and negotiate terms. Individual contractors typically don’t (and can’t afford to) get this protection. So I think that for the next little while we are going to hear a lot of stories about suppliers of services getting stiffed or badly treated by the platform provider or their customers. Again, this will shake out, but many folk will get hurt in the meantime. One difference between now and one hundred years ago is the power of brands to provide reassurance to consumers – and the power of individuals to hurt brand reputation through social media. The platforms are brands. I don’t see us heading very far down the road to Victorian skivvying anytime soon.

Olivier, you have written a terrific and provocative article. Thanks for posting it.

I don’t normally have the urge to comment – and certainly not at this length, so I think you’ve done something right.

Olivier! This is an amazing article — I loved your well considered, nicely detailed argument on the shared-gig-disruptive trend. You seemed to answer every question that I would have asked. I would love to interview you for the digital publication DisruptiveTechnologists.com – you have my email and I look forward to hearing from you — Lauren Keyson

“I don’t want to make this about class war, I’m not gonna be that guy.”

You’ll just be the blogger who understands and articulates a problem very well and writes about it. That’s valuable.

But the serf economy is what this is.

If your fundamental relationship to the economy is that you don’t own any property, and you sell your time and labor and physical health for currency to purchase the things produced by other people just like you, just like the landless peasants and serfs you descended from… you’re pretty much a serf.

The distance you see between the serfs and the comfortable place of self-denial you’re in now, the things you rightfully identify are under attack, that distance was made possible by people who recognized that it was already a class war whether they were ready to make it about that or not. Luckily they were, and adjusted their tactics accordingly.

Good post and many good points. Thanks.
Your post also shows that some useful innovations like Uber also bring about the need for complementary innovation on the legal/justice or governance front or society is at risk of getting imbalanced in a way that creates more harm than good. I run a global justice accelerator based in The Hague that aims to find, select and empower the much needed legal, justice and governance innovations around the world. You can find some examples at http://www.innovatingjustice.com . We are looking at innovations that can protect wages, stabilize supply chains and provide fair opportunities for startups and SMEs, among other things.
What I want to say is that there is hope and that there’s people working on solutions. Get in touch if you want to learn more.

Lyft and Uber do require some form of conformance to the laws. The first Uber I took got pulled over and ticketed (heavily) for not having the appropriate medallion posted. They got permission to operate out of SFO and, recently, OAK. Nashville has passed at least one law to specifically clarify how Uber and Lyft can operate legally. I, for one, highly value the following: 1) the drivers are all rated, 2) the driver routes are tracked via gps, so I know I’m not being taken via an unnecessarily long route just because I’m unfamiliar with a city, 3) the cars have been dramatically cleaner (overall) than most cabs I’ve taken, 4) I can use a single app most anywhere I travel, and 5) I don’t have to hand my card to the driver (and don’t end up with a paper carbon copy lying around in the cab, which happened the last time I took a non-Lyft/Uber cab in San Francisco), and I don’t have to deal with cash (which I seldom carry)…I enter my card information one time and can travel most anywhere.

Left out one key value: with one app, I can get a ride to come to my precise location, in completely different parts of the country. I don’t have to figure out what company to call in a particular city, describe my location over the phone, or go to a location where taxis are likely to be. I can see where the car is, and so wait in a safe place until I see the car is approaching my location. It provides peace of mind to me, as a traveler.

One of my favorite pastimes (yet annoying to most other people) is to point out how important words are. For example, a conversation with a friend;

Him: “I am buying a house”.
Me : “Wow, you are paying all cash for a house?”
Him: “No, I am getting a mortgage.”
Me: “Oh, so you are not buying a house, your bank is buying it and they are letting you live in it until you pay the for it.”
Him: “Stop being suck a dick.”

People do not think it is important to nit pick word use, but word use can massage our emotions, as you so eloquently pointed out in this article. It sounds much more exciting to “buy” a house instead of “being allowing to live in a house”. And “sharing” sounds much nicer than “micro-transactions”.

But marketers use these words because they are things people truly desire but cannot have; we want to be rich enough to buy a house, and nice enough to share. But most people can not do either because capitalism. So the thing that steals it makes us think they are giving it back to us. They are not.

Think about offering a ride to your family or friends – will they ask if your car has been inspected, you insured, regulations conformed?

Think about buying an iPad from someone on Craigslist – will you expect the same return/refund policy as you get from buying an iPad from Apple store?

Think about hiring a freelance programmer/transcriptionist/designer on any of those “sharing economy” websites – do you really care if they follow all the rules and pay all the fees as their “corporation” counterparts do?

No.

Because in THESE areas, regulations are NORMALLY NOT REQUIRED OUTSIDE BUSINESS CONTEXT.

You may say a Uber driver or Airbnb host is running a “business”. BUT should business at P2P level – extremely close to sharing a ride, shopping on Craigslist, or hiring a freelancer – be regulated as strictly as big companies?

Yes Uber and Airbnb are companies and do serious business, but they are simply ENABLING p2p business rather than running a “modernized” taxi company or hotel.

As to liability, many people above have mentioned this – P2P consumers would like to give up some protection for lower price, and they should have the freedom to. And this only applies to areas where regulations are normally not required outside the business context. (So one comment above on P2P drug-selling is really talking about business in a different league.)

For the taxi sector, I do think it’s over regulated more in order to raise barriers to entry than protecting drivers and passengers. And I’d love to see Uber drivers and passengers are also insured (probably already are since I’m charged $1 “safe rides fee”) but if they choose not to why not let them..

I agree that the name “sharing economy” is a hype, coined to draw attention and fundings, so I’m calling it P2P business. Whether or not, and to what extent P2P business should be regulated, I’m interested to see where it goes and I do hope P2P business will not be throttled.

In the UK, Uber drivers have to be licensed to the same standard as any other black cab, mini cab or taxi. The distinction between uber drivers and taxi drivers is also a bit odd. The vast majority of uber drivers I have met have been taxi drivers for years and chose to move to uber and prefer the working conditions.

What an awesome thought provoking and educational article. I have to admit it has opened my eyes to things I had not really contemplated before. I am not an advocate for big government but nor am I happy with the incredible disparity that is life today! It seems as though if you are not at the top with the “high flyers” chances are you’re sliding into a pit of darkness and dispair. I fear growing old when I may be totally forgotten only to be viewed as something that has outlived its usefulness and should be put down as a drain on the economy. Yesterday I was reasonably secure in the knowledge that I could get by – today – not so much!

Damn you Mr Blanchard. I have a lecture to write that has to be delivered to 500 government security heads next week on social media and human factor risks and you — and your (for the most part polite) commenters — have raised some really, really thought provoking ideas with regard to societal issues. Thank you for a wonderful distraction that, hopefully, I can actually shoehorn parts of into my lecture and justify what some may see as lollygagging for the past hour. I also look forward to reading more of your work.

Great article! Thank you! So you know, the microtransaction economy looks a lot more like class warfare when you’ve been unemployed for two years and the only prospect you’ve had that whole time was an “orientation,” i.e., training on the app. Or so I’ve heard.

Just getting to this article and I must say it was very thoughtful. I think that the real problem, however, is the outsourcing of good jobs to places with no protections whatsoever and the automation of jobs that stay here. Even though I live in the Bay Area and am a fan of all the services you named (to varying extents), I realize that good jobs are preferable to contractor gigs. However, I don’t think you dove deep enough as to why exactly they are preferable: it’s not like people love their corporate 9-to-5 desk jobs any more than they love being Task Rabbits or Uber drivers. It’s all about making enough money to do what you actually enjoy with your life. Some people love driving or talking to people or running a B&B, and if they could get healthcare and retirement savings doing that then maybe they would. To that end, having universally guaranteed healthcare, education, and retirement would free up people to choose jobs that they actually enjoy. As more and more jobs are automated (e.g. driverless cars will put every Uber driver out of business in the next decade or two), we need to move towards a guaranteed minimum income. Sorry for the disjointed thoughts and thanks for the article!

I call it a broken economy,not a sharing economy. these small economies we seek out to survive in in an society that excludes an increasing number of people are the result of the slow failing of an economy. At least for an increasing majority of people. The frustration with regulations is real. I think it comes from regulations and laws that disadvantage and handicap most of us. in a failing society guided by advertising as a moral community standard, the scam is accepted as normal behavior. mislabeling and relabeling is a common tool of the trade. welcome to the corporate world.

This is a great piece. One thing I would add, and this is really true for things like AirBnB, is that they impose new externalities on parties not part of the transaction. For example, the money paid for a party pad is, in part, generated by the reduction in utility of the neighbors of said party pad.

Oliver, great blog and very provocative as evidenced by the many insightful comments which add more food for thought. You mention ‘fair’ competition as a cornerstone of business conduct. While I would like to agree with you, I have to ask: When and where has business conduct ever been fair? Many years ago I wanted to start up a small safari operation in Johannesburg for people wanting to get out into the boonies and wilderness areas of Southern Africa. Naturally, to be legally able to do so there were a number of legal and operational loops to jump through. One of these was the ‘right’ of any existing service provider in this arena to raise an objection. My application was rejected – no reasons given. I did an ‘uber’ and set up my safari business in a way that circumvented the regulations. I created a travel club so my ‘safaris’ were only open to club members. I then offered a number of safari options with specific departure dates which which interested people join. Then the actual operation was based on shared rental of vehicle and equipment. Nothing about my operation was illegal but it quickly drew the attention of existing operators who immediately alerted the authorities who tried, but could do nothing since I was not breaking the law. All this was forty years ago … long before the internet and ‘apps’ but might well be considered a ‘sharing’ exercise. The greatest impediment was that very few Travel Agents would market my product as it did not fit with the traditional (accepted) model. Today the internet provides a platform … just as it has for Uber and AirBnB … to function very effectively outside of the norm. Moreover it provides a high degree of ‘protection’ to users via the customer rating system. Perhaps if these entities operated as private membership clubs they would differentiate themselves from the ‘public’ service. Then the use of such services would be conditional on club membership rules which would include concerns like insurance etc.

Bravo. By far the best, most articulate piece I have ever read on this subject (and I’ve read a lot of them). It should be required reading for everyone, especially in San Francisco (Ground Zero of the Sharing Economy).

Re: rideshares…one thing I would add about creating a level playing field is that the sheer number of ride share vehicles needs to be CAPPED.
Currently in SF, there are at least 20,000 Uber and Lyft cars clogging our already gridlocked streets. But the Mayor and city government (who are in the pocket of the ride share companies) turn a blind eye. It’s a travesty.

Great article, Oliver! I couldn’t agree more. Here in Austin, TX we just had a ballot proposition that was forced on us by Uber and Lyft, where they basically made the city hold an election that cost city taxpayers about $800,000 on top oof the approx. $8 million dollars that the 2 companies spent on lobbying voters. They basically spent about $200 per “yes” vote on an item that would have allowed them to circumvent city regulations on background checks and fingerprinting for their drivers ( contractors, sorry). It is with great pleasure I can tell you, that we told them to get bent. Now they are threatening to leave. See ya! Though I think they won’t….we shall see. In any case, a naked extortion attempt by a few multi-billion dollar corporate concerns that didn’t pan out…..At least until the utterly corrupt Legislature gets its hands on it. Keep up the good work… Aaron

You are correct. The problem is that we don’t know ahead of time which of the many disruptions is the “right kind.” We don’t know this until people try out the disruption and compare it to their alternatives, until existing companies respond to the disruption, and until the price settles down and we figure out what it really costs.

And this is why it is so important that we (a) not ask government to stifle disruption (save disruption in which one person starts to impose harm on another – fracking polluting groundwater is a good example), and (b) require that disruptors stand or fall on their own (for example, by not offering them government subsidies).